200% penalty on Cash Deposits over 2,50,000 is not 100% true
You would have got a message (forward) about 200% penalty on cash deposits. Many people have called me to know the correctness of the penalty calculation!
So, the question is
Does all deposits over Rs.2.50 Lakhs in the account is subject to scrutiny and penalty of 200% of tax?
The answer is NO. (Some people are spreading fear among the taxpayers)
Cash lying at home – Let’s accept the fact that most of the people may be keeping some amount of cash at home. Depositing such amount into bank account won’t attract tax or penalty.
Cash in proportion to Income – Say, your income is Rs.30 Lakhs per year and you have been paying taxes and filing return over many years. Now you are depositing, say Rs.15 Lakhs into your bank account. Does this subject to tax and penalty?
Mostly No. First of all, the cases for scrutiny will be picked up in the case of disproportionate cash deposits to the income earned. In the above scenario, it is quite unlikely to get a notice, even if you deposit over Rs.2.50 Lakhs.
If the case is picked up for scrutiny and the Assessing Officer (AO) is not convinced that the deposits are from the genuine source, then he may levy a tax on it.
The penalty of 200% u/s 270A – The burden of proving misreporting or suppression of facts will be on the Assessing Officer. He can’t just levy a penalty at his will. If he levies irrationally, it can be challenged in Appeals. So, the penalty is not automatic. One needn’t fear of it. If there is a reasonableness in your deposits, such cases won’t fit in 200% penalty.